Shadow inventory of 1.6 million homes haunts market recovery

About 1.6 million homes made up the nation’s shadow inventory in July, a reduction from 1.9 million during the same time last year, according to Santa Ana, Calif.-based Core Logic.

The company, which does not have shadow inventory data by state, said the 1.6 million homes represent a 5-month supply.

Shadow inventory includes seriously delinquent loans, homes in some stage of foreclosure, and homes that are already bank-owned but not on the market for resale.

About 390,000 homes are bank-owned, according to Tuesday’s report. The aggregate current mortgage debt outstanding of the shadow inventory was $336 billion in July, down from $411 billion a year ago.

“The steady improvement in the shadow inventory is a positive development for the housing market,” said Core Logic Chief Economist Mark Fleming. “However, continued price declines, high levels of negative equity and a sluggish labor market will keep the shadow supply elevated for an extended period of time.”